National Health Insurance Isn't the Cure

By
Doug Bandow /
September 23, 1991

THERE is something alluring about the concept of national health insurance. The notion seemed to die during the more fiscally conservative 1980s, but it is back in various forms. Rep. Dan Rostenkowski (D) of Illinois has introduced a bill requiring employers to provide health insurance or pay a 9 percent payroll tax to fund a federal program; similar legislation is pending in the Senate.The US medical system is a mess. Total health-care expenditures ran $675 billion in 1990, more than 12 percent of the gross national product. Between 33 million and 37 million Americans are believed to lack health insurance. Local, state, and federal medical outlays continue to race ahead. But real national health insurance, which would expand the demand for health care, is no solution. The government could hold down expenses only with rationing policies far more draconian than the private "managed care" now criticized for restricting access to medical services. Mr. Rostenkowski's bill, for instance, would limit total private and public health expenses to the annual growth in GNP. Are Americans ready to accept the results of such a system? Great Britain denies dialysis to anyone older than 55, a policy that allows 1,500 patients to die yearly of treatable kidney ailments. Britain also has a waiting list of 680,000 people for non-emergency surgery, one-fourth of whom will have to wait more than a year. Swedish patients wait up to 11 months for a heart X-ray and an additional eight months for surgery; research cardiologist Steffan Ahnve estimates that at least 1,000 people die annua lly from such delays. Another option is the Canadian system, recently endorsed by the General Accounting Office (GAO). In Canada the government acts as insurer for every citizen. It also controls the number of hospitals and specialists, decides on equipment purchases, limits the availability of costly operations, and sets physicians' fees. While the GAO claims that adoption of such a system would reduce US health-care outlays, the Canadian program is not cheap. Medical expenditures outpace inflation, and individual provinces, such as Quebec, are straining to finance the program. Cost increases are kept below those in the US only by reducing services. A patient may have to wait three months for a neurological exam, nine months for cataract surgery, and four years for a cornea transplant. Canadian Dr. Bill Weaver says, "The risk of dying on the waiting list for cardiac surgery is greater than the actual operative risk." As a result, many Canadians come to the US for treatment. Another approach, partly reflected in Rostenkowski's measure, would require employers to offer a certain level of health benefits to all employees. Many legislators support this system because it doesn't directly cost the government a cent. Yet the problem with "play or pay," as it is called, is obvious: It shifts, rather than reduces, costs. Such legislation would act as a huge tax on employers, discouraging job creation. The result would be more people with neither health insurance nor a job. If dramatic government intervention won't solve the problem, then what is to be done? First, states and localities need to break down monopoly barriers established by physicians that prevent qualified alternative health-care providers, most obviously nurses and nurse practitioners, from offering various medical services. Second, the federal government should act, in the words of the Heritage Foundation's Stuart Butler, to "create an incentive structure that encourages consumers to question the need and the cost of the health care that they purchase." Congress could establish health-care IRAs for people to use to buy insurance, with provisions designed to discourage unnecessary consumption, particularly sizable deductibles and co-insurance payments. A health-care voucher with similar requirements should be provided to poor Americans, who could then buy a private policy in the open marketplace. Congress should change the tax law to encourage employers to move in the same direction. In this way, insurance would protect people from the consequences of an extended illness, rather than the cost of an occasional visit to a doctor or hospital. Providing adequate, affordable health care to all Americans poses a difficult problem. But the answer is neither a huge new federal program nor a federal takeover of the medical system. Instead, we should try to make the current health-care industry more efficient by forcing providers to face competition and consumers to be more cost conscious.

Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Reagan.